ED Announces Automatic Loan Discharge for American Career Institute Borrowers

The Department of Education (ED) on Friday announced it would grant automatic student loan discharges to borrowers who attended the American Career Institute (ACI) in Massachusetts, due to admissions of misrepresentation to students, misstated job placement rates, and employing instructors unauthorized to teach in the state. ED also announced that it has approved borrower defense claims for more than 28,000 former Corinthian Colleges students, and about 6,300 former ITT Technical Institutes (ITT) students.

“With the help of state attorneys general, we’ve cracked down on bad actors that leave students with debt but meaningless credentials,” said Under Secretary of Education Ted Mitchell, in a statement. “We’ve taken important steps to provide borrowers the relief they deserve. This is real progress. And more work remains to ensure that relief continues for borrowers who are deceived by institutions that engage in fraud.”

Beginning Tuesday, Federal Student Aid will contact students who used federal student loans to attend ACI programs in Massachusetts, ED said. ACI enrolled about 4,500 students between 2010 and 2013, approximately 650 of whom have already received closed school loan discharges after the for-profit institution closed in January 2013. Overall, the loan discharges and refunds for payments already made by ACI borrowers will total about $30 million.

In November 2013, the Massachusetts Attorney General’s Office filed a complaint against ACI, claiming the school engaged in “a range of deceptive schemes.” The attorney general’s office and ACI entered into a consent judgment in June 2016, in which ACI admitted to making false representations to prospective students, such as misstating job placement rates for 15 cohorts of students.

“ACI was a predatory, for-profit school that admitted to breaking Massachusetts law and lying to its students,” said Massachusetts Attorney General Maura Healey, in a statement. “Today, these students are finally getting the relief they deserve. I thank Secretary King and the Department for utilizing its authority to grant immediate group relief to our students, and the dedicated lawyers and investigators in my office for building the case against ACI. Our office will continue to help students struggling with unaffordable debt and hold predatory schools accountable for their illegal conduct.”

ED also announced that to date it has approved more than 28,000 borrower defense claims, including 12,000 received since the most recent borrower defense claims report in October, for former Corinthian Colleges students, totaling about $558 million. ED has also approved about 6,300 of 14,200 applications for a closed school discharge from former ITT students, totaling about $97 million in debt relief.

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